Iraq northern oil output partly resumes even as exports halted

Norway’s DNO ASA has partially resumed production at the Tawke oil field it operates in the semi-autonomous Kurdish region in northern Iraq even as the main export pipeline remains shut.

DNO restarted production at Tawke last month and output is averaging about 40,000 barrels a day, according to a company statement. DNO said it had restarted the field to conduct well integrity tests and maintained output due to strong local demand. The nearby Peshkabir field remains closed.

International companies operating in the Kurdish region have been forced to cut output after a payments dispute between Iraq and Turkey cut off the main export route. Most of the barrels produced in Iraq’s north, which accounts for about a 10th of the country’s overall production, are piped to the Turkish port of Ceyhan on the Mediterranean.

“There is no light at the end of the export pipeline,” DNO Executive Chairman Bijan Mossavar-Rahmani was quoted as saying in the statement. The company is selling half of Tawke’s output to the Kurdish government, with the rest going to local traders, who are taking the oil by truck. DNO said it’s getting about half as much of the oil as it did before the pipeline closure.

Turkey halted flows on the pipeline in March after an arbitration court ordered it to pay about $1.5 billion in damages to Iraq for transporting oil without Baghdad’s approval. The arbitration between the two countries was the culmination of a long-running dispute between Baghdad and Erbil, the seat of the Kurdish regional government, over revenue from oil sales.

Restarting the pipeline will likely be on the agenda during an upcoming visit by Turkish President Recep Tayyip Erdogan to Baghdad. The Iraqi government announced the visit without saying when it will take place, while the Turks have yet to confirm a trip. Ankara wants to negotiate a settlement before reopening the link, people familiar with the matter have said.